Smarter Regulation: Strengthening the economic regulation of the energy, water and telecoms sectors

At Wave we constantly monitor developments which may impact the water market and our customers. The UK Government Department for Business and Trade has recently issued a consultation which considers how to strengthen the economic regulation of energy, water and telecoms. Doing so could result in better protection for customers, more competition within each market as well as increased growth and investment.

What does the consultation aim to achieve?

For markets to support the foundations of the economy, they need to allow enough capital investment and the protection of customers in a fair manner, but this can be a difficult thing to achieve. It means market regulators need to have the right framework in place, and it was identified in the Economic Regulation Policy Paper published in January 2022, that the existing frameworks for Ofgem, Ofwat and Ofcom could be improved. These sectors are vital services and incredibly important to the UK Economy. The Government is committed to the UK becoming the best regulated economy in the world and to help achieve this, The ‘Smarter Regulation: Strengthening the economic regulation of the energy, water and telecoms sectors’ consultation has been issued to seek feedback on five key areas.

The consultation areas

The climate that Ofgem, Ofwat and Ofcom operate in has become more complex since they were created. For example, climate change has meant that further investment in infrastructure improvements is needed and legal duties have increased demand on regulators, causing a lack of clarity for investors. The consultation focuses on a series of proposals that aim to:

  1. Increase growth – by supporting investment with a full and transparent assessment of what’s needed across the three sectors and how regulators can take projects outside of the price review, in addition to reducing their complexity.
  2. Protect customers – with the implementation of a Priority Services Register to allow data-sharing between service providers.
  3. Market competition – To find ways of introducing and maintaining competition in respective sectors:
    • a. Ofwat: supporting strategic investment through licensing and contracting models; increasing support to new entrants; changes to the Wholesale Retail Code; greater use of comparative metrics.
    • b. Ofcom: to review existing monitoring practices.
    • c. Ofgem: greater use of comparative metrics.
  4. Regulator duties – To ensure duties remain fit for purpose.
  5. Appeals – To make sure appeal regimes continue to hold regulators to account and to make it easier for consumer interest to be considered for the three sectors.

Our approach

We’ve reviewed this consultation and responded by sharing our experience and thoughts on where improvements can be made. We're awaiting a response from the Department of Business and Trade and will share any updates.